The United States is actually in an economic depression. It started in 2008. Why does it not seem like a depression? Suppose a private citizen had a job that paid $100,000 per year, suddenly got fired and couldn’t find a job no matter how hard he looked. But, he had the means to borrow $1,000,000 to live on until times got better. If he lost his job in 2008, he would be getting close to running out of spending money. Until he could no longer borrow money, no one would ever guess he was having any hardship.
That is basically what has happened in the United States. I explain that the money supply consists of all of the money that has been earned plus all of the borrowed money that can be repaid. That is an abstract concept and there is no exact number that can be used as a variable. Money created by government is not actually money but facilities theft by those with enough political power to control government.. Common sense can be used to tell whether the country is over that amount. When government adds money under the auspice of stimulating the economy as it is going into a recession, the economy is not actually stimulated. Instead, the money is used by corporations to buy back stock and pay dividends to stock holders. All humans operate according to one basic incentive, self interest. The wealthiest people on the planet can make the most money in the shortest period of time by using money added by government to finance corporate buy backs and pay themselves dividends. When it becomes impossible to borrow more money, the economy crashes just like the living standards of private individuals who borrow but have no income.
In the past, astronomical debt was not considered to be a problem because foreign entities were anxious to buy U. S. investments, both debt and equities. There is a problem now. Countries like China under valued its currency artificially to increase its exports to the United States. At the same time the United States, through its central bank, has intentionally enhanced the value of both stocks and bonds. In other words, the U.S., China and other nations for years have been doing everything possible to cheat each other.
As of 2017, none of the countries involved are getting what they want. Trade wars are beginning. In the spring of 2006, the United States was entering an economic recession. Since that time government intervention has been greater than at any time in our history. Despite what the empty heads tell you, recessions are absolutely necessary if a country is going to continue growing economically. Government intervention prevents what is perfectly natural from happening.
A healthy recession is necessary to reallocate a county’s resources in the most efficient way possible. For ten years now, government policy has been to keep GDP from falling at all costs. Markets for all goods and services have not been allowed to clear while financial assets have been artificially elevated. The economic imbalances we have today are many times worse than in 2006. Had a normal recession been allowed to occur, business and employment would be terrific by now. A natural recession works itself into a recovery in six to nine months. After ten years of avoiding a recession an actual depression is a certainty.
As I say, the cause of any economic problem can be reduced down to a few words. The cause of the depression we are now in is a lack of trust in the free market. The depression is aggravated by the failure of our political system. In 2008 when the TARP bill was passed over the loud objections of voters, that was a warning sign. Since 2008 passing bills against the will of constituents has become the standard. The depression will get much worse, and there is a chance our democratic republic will be replaced with something more authoritarian.